TaxTMI 
TaxTMI 
2010 (9) TMI 1116
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..... 2,04,15,912/- while computing the export turnover. b. The learned CIT(A) erred in not appreciating that the expenditure was incurred in Indian currency and accordingly cannot be excluded from export turnover. c. The learned CIT(A) failed to appreciate that such satellite expenses do not separately form part of the receipt from income. The appellant relied on the decision in the case of Patni Telecom P. Ltd. V. Income Tax Officer (22 SOT 26) (Hyd Tribunal). d. The learned CIT(A) erred in not appreciating the submissions of the appellant in the correct perspective. e. The appellant therefore prays that the learned Assessing Officer be directed not to exclude the satellite expenses while computing the export turnover for the purpose of deduction under section 10A of the Act. 2. Without prejudice to the above, a. The learned CIT(A) erred in not excluding the satellite expenses while computing total turnover for the purpose of deduction under section 10A of the Act. b. The learned CIT(A) erred in not appreciating that if the said expenses were to be excluded from the export turnover, the same would also be required to be e....
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....e cannot be regarded as ".... attributable to the delivery of the articles or things or computer software outside India ...." (c) the Satellite Expenses are not incurred in foreign exchange B In any event the entire Satellite Expenses cannot be excluded because Explanation 2(iv) sanctions the exclusion only of ".... telecommunication charges .... attributable to the delivery of the articles or things or computer software outside India ...." II Without prejudice to above, if it is held that the Satellite Expenses or any part thereof are to be excluded from the export turnover, the said Satellite Expenses or part thereof must also be excluded from total turnover - [See- M/s. TCE Consulting Engineers Ltd. V. Addl. CIT (see particularly pages 2, 3 to 6 and 16) ITO v. Sak Soft Ltd. 313 ITR 353 (AT)(SB)] 5. The learned D.R., however, relied on the orders of the A.O. and the CIT(A). 6. As seen from the facts of the assessee the A.O. has originally issued a show cause notice to the assessee why satellite charges paid by the assessee company should not be treated as capital expenditure for which the assessee has furnished the following reply:-....
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....(iv) of section 10A and held as under:- "Export turnover has been defined in clause (iv) of the Explanation 2 to section 10A. The meaning of 'export turnover' is also provided in other sections of the Act, say clause (c) of section 80HHE and Explanation (b) to section 80HHC. According to Explanation (b) to section 80HHC, export turnover means the sale proceeds receivable in foreign exchange as per sub-section 2(a) of section 80HHC of all goods which are exported out of India, but which does not include freight and insurance. Similarly, total turnover for the purpose of deduction under section 80HHC, which is defined in Explanation (ba) at the end of section 80HHC in the negative term, means as not including freight and insurance attributable to transport of goods or merchandise beyond the custom station and profit on sale of licence, cash assistance, duty drawback, etc. Thus, the term 'export turnover' does not include freight and insurance attributable to transport. Explanation (c) to section 80HHE is similar to clause (iv) of Explanation 2 to section 10A. On an analysis of definition of 'export turnover' as provided in clause (iv) of the ....
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....ses are required to be reduced from the consideration received for the purpose of arriving at the export turnover. The logic and reason behind this have been explained by the CBDT vide its Circular No.564, dated 5-7-1990, that the delivery of the goods should be Free on Board (FoB). The goods exported at FOB is important in the sense that deduction under section 10A is permissible only in respect of consideration received against goods and not for the consideration received against freight, etc. All the assessees should get deduction under section 10A on consideration received against supply of goods at FoB. Therefore, the condition of delivery of goods at FoB has been put and the definition of 'export turnover' as provided in clause (iv) of the Explanation 2 to section 10A is required to be interpreted accordingly. In the instant case, the Assessing Officer had deducted the ISP expenses from foreign exchange consideration treating it as communication charges. The said expenditure on 'Internet Service Provider (ISP)' does not come within the scope of telecommunication charges as provided in clause (iv) of Explanation 2 to section 10A, because ISP is for tra....